Key Takeaways
- Investors shifted from pure AI enthusiasm to a “debasement trade,” buying gold and silver as a hedge against a weaker U.S. dollar driven by tax cuts, heavy government spending, and falling foreign confidence in U.S. policy.
- Precious metals briefly sold off after Kevin Warsh, seen as an inflation hawk, was named to replace Jerome Powell as Fed Chair later this year, but the report still favors long‑term exposure to gold and silver.
- U.S. and overseas earnings remain strong, but equity investors are more cautious due to high valuations, questions about AI investment payoffs, and rising policy/tariff uncertainty that could reduce foreign capital flows into the U.S.
- The key concern going forward is whether big tech is funding massive AI capex with more leverage, while a soft labor market, weak consumer sentiment, and rising inflation expectations could slow growth and earnings.
- Equity leadership rotated away from mega‑cap tech into energy, materials, industrials, and a broad mix of small‑, mid‑, and large‑cap names, with greater focus on both earnings and valuations; volatility rose on economic and policy worries.
- International developed and emerging markets outperform U.S. stocks in January thanks to lower valuations, solid earnings, and a weaker dollar, supporting long‑term positions in global materials and diversified global equity exposure.
- Bond returns were roughly flat across durations and credit tiers, with tight spreads and little reward for taking more duration or credit risk; heavy government spending and uncertain Fed policy are ongoing headwinds.
- Alternatives remain a key portfolio tool: the commentary favors liquid, diversifying strategies and continues to hold gold, silver, and active commodity exposure, seeing tangible assets and global energy as important in an environment of higher uncertainty and inflation.
The Debasement Trade Dominated Most of January: Markets shifted their sole attention from AI and AI infrastructure spending to hedging against a weaker US dollar through purchases of precious metals, including silver and gold. The quick reversal of precious metal prices at month-end followed the administration’s announcement of Kevin Warsh, a known inflation hawk, as Jerome Powell’s Fed Chair replacement later this year. Despite this short-term sell-off, the fundamental case for continued longterm exposure to precious metals (gold & silver) remains. Tax breaks, coupled with rampant government spending, are key factors that put downward pressure on the US dollar, along with falling overseas confidence in the US government and its economic policies.
Market Uncertainty Rising: Strong US earnings and stable overseas earnings have continued to propel equity assets higher, although with greater trepidation based on high valuations and doubts about a quick payoff in massive AI-related investments. Ongoing tariff threats and inconsistencies in US policy decison making has placed foreign capital flows into US investments at risk.
Future Earnings & AI Capex: We are nearing the end of this week's quarterly earnings announcements, and most results continue to meet market expectations. The question moving forward is not whether major tech companies are still spending record amounts of capital to fund the AI buildout, but whether they are now using leverage to do so. Also, a stagnant labor market, negative consumer sentiment, and rising inflation expectations could put the brakes on economic growth and earnings.
EQUITIES
Equity returns continued their rotation out of technology stocks in January, shifting into energy, raw materials, industrial, and materials stocks across a broad spectrum of small- to large-cap companies. Focus shifted from earnings growth alone to earnings and valuation levels across most sectors of the US equity markets. At the same time, volatility was higher during the month due to concerns over economic conditions and shifting policies in the US.
The overseas markets continued to deliver stellar returns in January, exceeding those in the US equity markets once again. Lower market valuations and solid earnings growth in both developed non-US and emerging markets, combined with a weak dollar (excluding Japan), were the drivers of positive returns for US dollar-based investors.
Long-term positions in global material stocks and a diversified mix of high-, mid-, and large-cap stocks, both home and abroad, continued to deliver solid risk-adjusted returns in January.
FIXED INCOME
Bond market returns were flat in January across the spectrum of maturities and credits, driven by higher inflation expectations and record-tight yield spreads. There has been very little risk premium for extending duration and taking on additional credit risk in the current environment. Excessive government spending and uncertainty about future Federal Reserve policy remain headwinds for the bond market.
ALTERNATIVE ASSETS
Liquid and non-correlated assets and the potential for positive returns remain our primary focus in the alternative asset class space. We continue to hold long positions in both gold and silver and maintain our exposure to actively managed commodities. With our view of higher uncertainty, higher inflation, and sustained demand for global energy still in place, investments in tangible assets still have a prominent place in diversified total investment portfolios.
MARKET PERFORMANCE AS OF January 30, 2026
DISCLOSURES
The statements herein are based upon OAR Financial LLC's (OAR Financial) opinions and the data available in the publication. They are subject to change at any time without notice. This communication does not constitute investment advice and is for informational purposes only. It is not intended to meet the objectives or suitability requirements of any specific individual or account. It does not guarantee that any model's investment objective will be met. Investors should assess their investment needs based on their financial circumstances and objectives. I think neither the information nor any opinions expressed here should be considered a solicitation or a recommendation by OAR Financial or its affiliates to buy or sell securities or investments or hire any specific manager.
OAR Financial prepared this Update utilizing information from a variety of reliable sources, including, but not limited to, custodians, mutual fund companies, investment managers, Morningstar, Bloomberg, other third-party service providers, and, in some cases, as directed by the client or their representative.
It is important to remember that risks are inherent in any investment and that there is no assurance that any investment, asset class, style, or index will provide positive performance over time.
Diversification and strategic asset allocation do not guarantee a profit or protect against a loss in a declining market.
Past performance is not a guarantee of future results. All investments are subject to risk, including the loss of principal. You can change the portfolio positions anytime; your portfolio may not reflect the information referenced.
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The information presented in this commentary is the opinion of the author and does notreflect the views of anyother person or entity unless specified. The information provided isbelieved to be reliable and obtained fromreliable sources, but no liability is accepted forinaccuracies. The information provided is for informationalpurposes and should not beconstrued as advice. Advisory services offered through Knode Wealth Management,L LC, aninvestment adviser registered with the State of Texas.
